What Nonprofits Need to Know About the Affordable Care Act

Nonprofits, like all other employers in the United States, are affected by the Affordable Care Act (“ACA”). The size of a nonprofit’s workforce will determine which provisions of the ACA it must follow. In general it’s important to know whether or not your nonprofit has 50 or more “full-time equivalent employees[1],” as defined in the ACA.

Learn about the tax credit

Does your nonprofit pay for health insurance for its employees? If so, your nonprofit may be eligible for a special refund – called the “small business health care tax credit.” If your nonprofit employs fewer than 25 employees, pays premiums for health insurance for its employees, and average wages for employees are less than $50K annually, the nonprofit can apply for a “small employer health care tax credit[4]” that can help pay for the cost of health insurance for employees. Since tax-exempt organizations do not pay income tax to the IRS, the "credit" is in the form of a refund on previously paid employee income tax withholdings.

Practice Pointers

The ACA requires almost all employers to provide notice[5] to their employees explaining available options for health insurance.

Almost all nonprofits are covered by the exchange notice requirement, but very small nonprofits, that are not subject to the Fair Labor Standards Act, such as those with less than $500,000 in annual revenue, are not covered by this requirement - See Department of Labor[5] explanation.

The notice requirement applies to nonprofits with any number of employees, even if only one employee.

Special rules apply to small nonprofits with fewer than 25 employees who pay health insurance premiums for their employees. Read about how your nonprofit may be eligible for the small business employee tax credit[4].